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tbriggs1 · Joined: 12 Feb 2008 Posts: 2 1.87 Dollars($)

This is REALLY gonna be a stupid question but I'm too embarrassed to ask the loan officer.

I'm applying for a home equity line. I have a first mortgage at $144K and a second mortgage at $24K.

The loan officer called and said that I'm "approved" for $36K so I'll have $12K available.

Are you ready for the stupid question ????

This means that I will no longer have a monthly payment on the 2nd mortgage right, because part of the $36000 went toward paying it off completely and I have access to $12000 ONLY IF I need it.

The rate is prime MINUS 1.26% for six months then converts to prime ( our house on the market so hopefully it'll sell before six months ).

So for instance next month or whenever I use $8500 then my monthly payment (until August) will be calculated at 4.74% since current prime is 6% based on 30 yrs ??????

Another point, I received this offer in the mail from my bank. In the fine print it says "minimum line amount of $10,000 is required with a required initial advance of $5000 or greater".

Does this mean I have to automatically withdraw $5000 ????? My only purpose for the loan is for emergency.

Thanks for any advice.

gmakerley · Posted: Tue Feb 12, 2008 7:29 am Post subject:

i believe you understand precisely what you are getting, save for the last item. inasmuch as you are paying in full an existing second mortgage, that disbursement to do the payoff ought to take care of your initial advance. you ought not be obligated to take any further advances unless, and until, you need it for an emergency, as you stated.

your bank is treating you nicely, i think.

tbriggs1 · Joined: 12 Feb 2008 Posts: 2 1.87 Dollars($)

Thank you for your reply!

Just to make sure . . .
(1) NO monthly payment because the 2nd has been paid in full (unless I withdraw money)

(2) if I do make a withdraw then the payment will be based on 30yrs (is 30yrs standard or could it be based on 5yrs, 10yrs, etc ????)

gmakerley · Posted: Tue Feb 12, 2008 7:49 am Post subject:

#1 - you would be making payments, i imagine, on the balance that you owe to your new lender; which is the $24000 +/- that was paid out to the old lender. those payments would (probably) be interest-only at 4.74% (forget the 30 year term - not relevant in this sort of loan). the bank can verify this, but by my calculation, your monthly obligation will be $10, unless they have a minimum payment built-in.

as for any draws you take, the calculation would be the same: "balance times rate divided by 12 months = payment amount."

nonetheless, check with your bank for complete clarity.

livinginnky · Posted: Tue Feb 12, 2008 12:15 pm Post subject:

Posted: Tue Feb 12, 2008 1:01 pm Post subject:

OK OK I'm an idiot !!!!

However I don't think it's interest only . . . it's prime MINUS 1.26% for the first six months. Smile

Jessica

Ok so what I understand is, tbriggs, you have paid off the existing second mortgage with a home equity line of credit. So payments will be made on the the home equity line of credit, that is the new loan and not the old one; the old one is already paid off.

Now, you have been approved for $36 K. The loan provider is not concerned how you spend it. So, the bank/lender require you to take out a minimum credit of $10,000 each time you borrow from it.

lisascherzer · Joined: 04 Jan 2008 Posts: 755 1.12 Dollars($)

You would be paying on the new mortgage that paid off the old mortgage so you would still have payments. You will have a remaining 12K left to use if needed in the future if you go with the 36K loan. As far as the other offer of the 5000 min draw, you would satisfy that since they would pay off your 24K existing second mortgage.

I noticed that you mentioned that you would be selling the home. Are you in the process of purchasing a new home? If so, you may want to look into a bridge loan that would not require payments on current home for 12 months or until sold (whichever comes sooner).

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